Failure to extend this provision could also scuttle the hard-won $25 billion mortgage foreclosure settlement so painstakingly negotiated by the federal government --- an agreement requiring banks to use the preponderance of the settlement money to help borrowers, with a minimum of $10 billion slated for principal reduction.
All of these measures will be savagely undercut if Congress doesn't find the moral courage to act on this extension.
The stakes are incredibly high. With almost three million mortgage loans in or near foreclosure, five million more borrowers suffering with high-rate loans that they have not refinanced, and nearly 12 million borrowers whose mortgage debt adds up to $600 billion more than the homes are worth, it is clear that mortgage relief is broken. It is just as clear that this is no time for Congress to make things even worse for homeowners through institutional lethargy and partisan foot-dragging.
The New York Times, in a powerful editorial published Saturday, said, "The question now is whether Mr. Obama will use his second term to get mortgage relief right and, in the process, put the economy on a firm footing." The same question applies to Congress --- and one excellent way for Congress to demonstrate its resolve would be to put aside the punting, name-calling, and stalling and extend the Mortgage Forgiveness Debt Relief Act.
Another, as the Times notes, would be to revise Senate rules to enable rapid confirmation of a new director for the agency overseeing Fannie Mae and Freddie Mac --- one who will not oppose efforts to reduce principal balances on underwater loans, as acting director Edward DeMarco has unwisely done. A third would be to pass two bills introduced by Senators Merkeley, Boxer, and Menendez to expand refinancing and principal reductions.
In a word, it's time for Congress to put aside childish things, learn the lessons of the last election, and take seriously the problems of the American people. American homeowners are still wobbling on the edge of a cliff. Our political leaders have one month to pull them --- and the U.S. economy back from the brink. While the fiscal cliff gets all the attention, the mortgage cliff is just as steep, and just as perilous. If American consumers take another big fall, our leaders are almost certainly not far behind.
Adam Levin is chairman and cofounder of Credit.com and Identity Theft 911. His experience as former director of the New Jersey Division of Consumer Affairs gives him unique insight into consumer privacy, legislation and financial advocacy. He is a nationally recognized expert on identity theft and credit.